Stability and Long Term Planning are the Keys to Success

Just like in sports, to be successful in the journey to financial independence you need stability and a long term plan in place. In celebration of the end of the English football season on Sunday here are some comparisons between the two spheres.

My team is Bournemouth, who play about 10 miles from my home town. As such I have followed them for years, however as i’ll explain below this has been tough for most of my adult life overseas.

US Sports have an almost socialist structure, parity is celebrated and there is no punishment for the worst teams. In fact they get rewarded by being able to pick the best college players the next year. European sports have a more capitalist structure, dynasties are common and most critically the teams that finish bottom are relegated to the league below and replaced by the best team from that lower league. It would be like the lowest team in the MLB being sent down to the AAA.

My own team has spent most of the last 100 years in the bottom league of the English professional leagues (the equivalent of single A in baseball). About six years ago two things happened that propelled the club forward. Firstly ownership of the club changed hands and investment was made available by silent investor. Secondly a former player, Eddie Howe was made manager of the team. He had just retired from the game and still in his early thirties he was given the opportunity to drive the team forward.

While of course the money is helpful it has been the owners willingness to let Howe run the team how he wanted to that allowed him to execute the long term plan for the club. Howe had a vision of the style of play and types of player he wanted and has not wavered from that even when results were not going so well.

Three years ago Bournemouth were promoted into the Premier League against all odds. At the start of the next season the team were favorites to be relegated straight back down. To most people’s surprise they fairly comfortably stayed in the division. The last two years have been about consolidating their place in the Premier League. They are now considered an established Premier League club. While they will never be strong enough to push for the championship, keeping their Premiership status each season is an achievement in itself. However it’s important not to normalize this level of over achievement, this club is the smallest in the history of the league as such staying up is celebrated each year by the fans. We are all aware that this will end one day, and should Eddie Howe leave and be tempted by a bigger club with more resources then whoever comes in to replace him may not have the skill, or philosophy that he had and we could end up dropping down the divisions.

Staying in the Premier League is worth at least 100 million pounds ($140 million) each year in television revenue. Therefore a lot of clubs think only about the short term. This means that as soon as a team goes on a losing run it is not unusual for clubs to fire their managers to try and bring someone in to turn the club around. As such it’s not unusual for half the clubs each season to fire and change their managers. Therefore any long term plans and visions are ripped up. It’s almost impossible to succeed without a long term plan to follow through on.

Investing and preparing for retirement is a bit like owning a Premier League club. The same philosophies apply. You need a long term plan, if your portfolio is losing money it’s tempting to consider “firing” the portfolio and starting again. However you need to stick with the long term plan. If you think of the players as being like the individual components of your portfolio then of course you need to review the squad each year, but making wholesale changes will disrupt the balance. You need to maybe upgrade one or two players, but it needs to be evolution not revolution.

Staying the course and not wavering on your beliefs and philosophies is important in investing and preparing for financial freedom. Panicking and making wholesale changes can lead to disaster.

I like the US style sports league better. Teams should have a chance to improve.
Good analogy to long term investing. Once you have a solid long term plan, then you need to stick with it. You can’t base your action on the short term volatility. That’s a lot more stressful and probably won’t perform as well. Good post.

I think a lot depends on what you are used to. I don’t like the “closed shop” of the US leagues where there is no reward for small market teams to improve and move up. But yes it’s not fun sometimes to see the same team win every year, unless it’s your team.